Last step for Jacksonville's pension agreement is a long one

Agreements worth $250 million in place, with hundreds of millions more to go

Bob.Self@jacksonville.com Mayor Alvin Brown's chief of staff Chris Hand answers a question about unfunded liability during a meeting last Monday. Hand says the mayor's latest proposals still would likely get the pension fund to 80 percent funding around 2028.

They’ve already agreed on the single biggest long-term money-saver, which is lower pension benefits for new hires. Now they must agree on pension benefits for current employees and nail down the city’s commitment to pay an extra $40 million a year to the pension fund.

At first blush, those might seem like competing goals. The attempt to reduce pension benefits is aimed at preventing the city’s annual pension costs from soaring to more than $400 million by 2036, compared to $144 million now.

At the same time the city seeks to rein in long-term costs, it needs to make higher payments now to improve the fund’s health so it can cover 80 percent of pension obligations by 2028.

Currently, the pension fund’s assets can cover 43 percent of future pension obligations, which is one of the worst levels in Florida.

The 2028 target comes from the pension-reform task force’s “shared sacrifice” package of recommendations that has been the springboard for the negotiations.

“We’re close,” Brown said. “I think we’re going in the right direction. I think we’ll be able to wrap it up.”

THE PROPOSALS

Though progress has been made, the agreement on new hires simply replicates the agreement Brown and the Pension Fund reached in a previous round of negotiations. Last year’s talks would have resulted in $250 million in savings through 2028.

This time, the target is several hundred million dollars more.

“We’re down to the last issues, which are certainly tough ones,” said Walt Bussells, chairman of the pension fund’s board. “Our board has accepted the idea that the concept of shared sacrifice is required and is appropriate. Hopefully, it’s a package that can win approval by everyone who needs to approve it. We’ll see.”

So far, the pension fund has not agreed to benefit cuts for current employees as part of the shared sacrifice.

John Keane, executive director of the fund, has proposed immediate transfer of about $61 million from pension fund accounts to the city.

In addition, he said the fund would give City Hall a greater share of the $10 million of Chapter funds that flow to the pension fund from the state each year.

Keane says that because those Chapter funds are supposed to finance new pension benefits, dedicating them for regular pension benefits is “shared sacrifice” by current police and firefighters, who also would see paycheck deductions for their share of pension costs rise from 7 percent to 10 percent.

Brown has insisted on reducing eventual retirement payments for current employees, saying 3 percent cost-of-living adjustments on their pensions in retirement are not sustainable when the fund’s assets can pay only 43 percent of future pension obligations.

Brown originally wanted to bring down that COLA to 1.5 percent or the inflation rate — whichever is less — on pension benefits earned after the new agreement takes effect. He later moved to calling for a maximum 2 percent COLA.

Chris Hand, Brown’s chief of staff, said the mayor’s latest proposals still would likely get the pension fund to 80 percent funding around 2028.

Neither the city nor the pension fund have provided detailed financial forecasts on their proposals, however, so the negotiations have not had any side-by-side comparisons of the impact on the pension fund’s financial health.

WHERE WILL $40 MILLION COME FROM?

The other part of the shared sacrifice involves the city agreeing to contribute an extra $40 million a year to the pension fund, above and beyond what’s required by state law, for a period of 14 years.

The task force and the city both assume the extra funding will flow into the pension fund, key to enabling its assets to reach 80 percent of future pension obligations by 2028.

Brown has not identified how the city would come up with that money.

Keane said the final agreement must make that $40 million mandatory, not just an option for the city.

Pension fund board members Bobby Deal and Richard Tuten both stressed during a Friday board meeting that if there’s no ironclad commitment, it won’t be an agreement that’s built to last.

“They can literally promise us anything, and three years from now, we go through this all over again,” Tuten said.

He said in an interview that locking down the city’s financial commitment will reassure bond rating agencies and also give confidence to people considering Jacksonville for police and firefighting careers.

“You don’t want uncertainty when you’re trying to attract educated, smart, talented people to your workforce,” said Tuten, who is a fire department lieutenant.

Deal said the city has entered into binding, long-term financial contracts with entities such as the Jaguars, so it should be able to do the same for a pension-reform agreement.

“What’s to stop the city from saying, ‘We don’t need to do it this year because otherwise we’d have to scale back library hours?’ They have to indicate a funding source and dedicate the money to ensure they adhere to their side of the bargain and we adhere to ours.”

not saying join FRS just align to their requirements. As far as 3 % contribution vs 8 % it's apples and oranges. FRS employee's contribute far more than their 3% as a result of employer contributions and employee's taking lower pay in addition to them paying social security tax.

Don't forget the millions the city will have to pay into social security so that officers can collect just as in the FRS. Also each police and firefighter would get about a 4 or 5 percent pay raise because the contributions into FRS is 3 percent not the 8 percent members are contributing.

Simple solution, align it to mirror FRS benefits which are much more frugal and sustainable. Retirement is based on best 5 years rather than best 2, cost of living is frozen at years of service put in to 2011 and drop is set at 1.3 %. Is JSO worth more than our State Troopers?

So let's pretend for a moment that the pension board agrees to changing the contract for those already retired or those that are close to retire. What would then stop the city from crying wolf in two years and demand more reductions? Where would it end? With about 200 JSO Officers retiring in the next two years, who in their right kind would come work here to replace them? Who will replace the Fire Department personnel leaving?